Regional report highlights funding routes

Premier Colin Barnett may be flying high in the polls, but he owes his ability to govern to a small party that won the balance of power on the basis that it would return royalties collected by the state back to the region where they were earned.

The Royalties for Regions scheme, which the Nationals demanded for allowing the Liberal Party to form a minority government, has become an $850 million a year infrastructure and development department overseen by Brendon Grylls, who can act like a mini-treasurer as a result of this funding.

But R4R, as the scheme is known, has not sought to unpick many of the causes of why money earned from resources bypassed the regions to treasuries in Perth and Canberra in the first place.

A new report by Western Australia’s Regional Development Council, the peak body for nine state-controlled regional development commissions, has delved into this area in an attempt to put the spotlight on the issues that created the need for R4R in the first place.

The report, titled ‘Extractive Industry and Sustainable Regional Development’, makes a number of recommendations that it believes would put the areas most impacted by resources development on a better financial footing.

That includes changing the way local government rates can apply to mining operations, including those exempted from rates by state agreements, and creating a better benchmarking system that will encourage more direct community funding by companies, typically referred to as corporate social responsibility.

While the report does not exclusively look at financing – its recommendations also include a specialist state planning group, better government agency coordination, a regional community sustainability policy and better measurement of regional populations – there is no doubt that funding is a major stumbling block.

In fact the report’s author, Syme Marmion & Co, states that a key requirement of the study was to find how sustainability could be improved particularly by “ways in which contribution levels in the extractive industries may be regulated and increased”.

The RDC report suggests this contribution increase may possibly come from the application of a formula or quantum levied on resources companies.

Acknowledging resistance to this approach by mining companies, the report admits that new taxes or levies were unlikely to find much support from industry. While the resources super profits tax isn’t mentioned specifically, it is a clear example of how industry can react to new taxes.

“However, research does indicate the need for a system of contributions in which all players, not just those who do so voluntarily, are required to pay a fair share of local community costs in their area of operations,” the report said.

“This presents a strong case for the payment of local government rates by all commercial operations in whatever industry, making full use of an established mechanism designed to ensure that everyone contributes to the costs of maintaining, improving and sustaining infrastructure and services in their community.”

In its recommendations, the RDC wants the state to establish a fair rating system that is comparable across regions but provides local shires with flexibility.

It also recognises that some mining companies have various exemptions from rates under their state agreements and wants the state to reimburse the impacted shires for the loss of revenue.

Interestingly, the report found that when mining companies were required to pay rates, that had little impact on the company’s voluntary spending.

“Where an extractive industry company had been required to pay correctly assessed local rates, we were informed that this action had not reduced their level of corporate support and discretionary contributions to the local community or affected ‘in kind’ cooperation with the state,” the report stated.

But it also found that while CSR commitment was a core part of the mining sector, especially at the bigger end of town, expenditure in the community local to the resources operation fluctuated across the sector.

As a result, the RDC wants to develop a CSR benchmark for resources industries in WA, requiring companies to commit to the process that would include an index.

“A WA benchmark index for extractive industry performance has the potential to track industry activity on a number of fronts from indigenous training and employment to environmental issues and CSR provisions,” the report said.

“Run independently of government, an extractive industry index could publish a regular response to agreed criteria with companies using the same program to measure additional areas of company performance for internal use.”

“Across state government agencies, an extractive industry performance index will provide an overview of contributions and compliance with state legislation in areas such as the environment and remediation, as well as other less defined areas, such as social impact studies and contributions to community, that may prove useful in determining the planning and likely support for additional community services.”